School employees and teachers: when is the best time to retire?

Is it better to retire at the beginning of summer or at the end?

When it comes to retirement for teachers and school employees, a few months can have a big impact. Before deciding on the month you want to retire, you need to understand how Cost-of-Living Adjustments (COLA) and the Public Employees Benefits Board (PEBB) affect your retirement benefits.

How does COLA affect your benefit?

Starting the first full year after retirement, DRS will adjust your monthly benefit on July 1 every year.

The adjustment, known as a COLA, depends on the Seattle Consumer Price Index (CPI) percentage change, though the COLA is capped at 3% a year. If the CPI is higher than 3%, the additional COLA is banked. When the CPI is less than 3%, we add that amount to your benefit in future years.

How does SEBB/PEBB affect your benefit?

During your school career, the School Employees’ Benefits Board (SEBB) covers your health insurance.

As a retired public or school employee you have access to insurance options through the Public Employees Benefits Board (PEBB). To join PEBB, you must meet qualifications and enroll no later than 60 days after your employer-paid, COBRA or continuation coverage ends.

Under PEBB, you will still be responsible for paying your monthly health insurance costs to the Health Care Authority (HCA).

How to choose:

• Decide when you want your COLA to start
• Look at the cost of your current employer-paid benefits versus the cost of retiree health insurance coverage during the last two months of your contract

Retiring in July vs September

Retiring in July

If you separate from employment and end your contract in June, you can retire starting July 1, 2026:

• You’ll receive your pension benefit in July and August. If your contract was set to run through August, you will need to talk with your school about what ending your contract in June means for receiving your remaining salary.
• Your COLA will be applied starting on July 1, 2027.
• Health insurance through the SEBB program will end after June 30, 2026, and you will be responsible for your health insurance costs for July and August. However, if you’re eligible and meet PEBB’s procedural requirements, your retiree insurance coverage will start July 1, 2026.

Retiring in September

If you separate from employment and end your contract in August, you can retire starting Sept. 1, 2026:

• Your pension benefit will start in September. You will receive your benefit the last business day of each month.
• You missed the COLA, so we will bank it or set it aside until July 2028, when it goes into effect. This means that your COLA in 2028 could be bigger than it would have been if you had chosen to retire in July 2026.
• You’ll earn service credit for July and August unless you’re in TRS Plan 1.
• You’ll continue receiving SEBB program insurance coverage in July and August through your employer.

School employees’ healthcare in retirement

If you are planning to receive SEBB benefits in July and August, you may not choose a July retirement date. You will become a September retiree.

Return to work rules for substitutes

You must have a 30-day break in service from the day you retire before you can return to work as a substitute. You may be billed for any days you work before the 30-day break. The only allowable pre-arrangement is for those retirees who ask their employers to add them to the substitute list with no guarantee of future assignment. However, the retirees added to the substitute list are also required to wait 30 days after their retirement date before accepting and performing substitute work. You may not work in the month of retirement.

Summary

When you are eligible for it, the COLA is applied regardless of the month you choose to retire.

As you transition from a working employee to a retiree, you need to consider your health coverage. This is an important decision. It’s especially true if you have ongoing care, like prescriptions or treatment.

See these resources for more details:

Videos

Retiring in July vs September – Teachers and School Employees

Applying for retirement: a tutorial of the online application

Fund your future podcasts

Episode 46 – Teachers: out-of-state service credit

Episode 57 – Understanding separation vs. retirement dates

Episode 68 – Understanding COLAs and the CPI connection

While DRS doesn’t administer health care benefits, we’ve gathered some helpful information here including contact information for the Health Care Authority.

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